German retailers reported a surprisingly strong increase in business at the start of the year, official data showed today.

Retail sales, a closely watched measure of household confidence in Germany, increased by 2.5% in January compared with December, the federal statistics office Destatis said.

That was the strongest increase since February 2007, the statisticians noted.

Retail sales had dropped by 2% in December and analysts had been forecasting a much more modest increase for January. 

On a 12-month basis, business increased by 0.9% in January compared with the same month last year, the statisticians calculated.

German retail sales data are subsequent to frequent revision, but following a rise in a key consumer confidence index earlier this week, analysts said the outlook for household spending in Germany looks positive.

The GfK consumer confidence barometer rose in February and is projected to rise again in March.